A Look at Worker's Comp
An industry lawyer and managing partner at Fattorosi & Chisvin, Fattorosi isn't the first attorney to comment on the "independent contractor vs. employee" issue for those working in the adult industry.
In June 2004, following the HIV outbreak that caused a two-month, self-imposed industry moratorium, industry lawyer and Free Speech Coalition Chairman Jeffery Douglas was quoted in an article for the San Fernando Valley Business Journal, saying, "The vast majority of the 1,200 people that make a living performing in the movies are not employees, they are independent contractors."
More recently, attorney Clyde DeWitt was quoted in a September article posted on AVN.com saying, "The greatest temptation for businesses that are new and/or small is to classify employees as independent contractors." He went on to state that employers "must have workers' compensation insurance."
Unlike Douglas or DeWitt, who specialize primarily in 1st Amendment and obscenity law, Fattorosi's practice is based in labor law, with a specialization in workers' compensation issues. And while any issue is debatable, particularly amongst lawyers, Fattorosi cites specific case law and other legal references to back up his assessment of adult industry workers as employees.
The debate was brought into sharper focus after the 2004 HIV outbreak in which Evasive Angles and TT Boy Productions were cited and fined $30,560 for noncompliance with Cal/OSHA's blood-borne pathogens standard. In effect, Cal/OSHA determined the infected performers to be employees and was, therefore, able to fine the companies for failure to comply with pathogen standards, failure to report a serious work-related illness, and failure to prepare a written injury and illness prevention program.
Following the incident, Cal/OSHA established safety standards pertaining specifically to the adult industry. Those standards, posted on the Cal/OSHA website, clearly state "Even workers who are paid as independent contractors may be considered employees under the law. The Division of Labor Standards Enforcement (DLSE) provides guidance for determining whether someone is an independent contractor."
The DLSE website states that each claim is considered on a case-by-case basis and that "there is no set definition of the term 'independent contractor.'" However, it also says the "DLSE starts with the presumption that the worker is an employee" and that "the most significant factor to be considered [when determining employee status] is whether the person to whom service is rendered (the employer or principal) has control or the right to control the worker both as to the work done and the manner and means in which it is performed."
Because production companies and content producers retain what is called "pervasive control over the operation as a whole," according to Fattorosi, that implies an employer/employee relationship and, as such, the employer is obligated to provide workers' compensation insurance coverage in the event of a work-related injury or illness.
Fattorosi has been vocal within the industry on the topic; most recently, he has been slated to co-host a talk show, "Breaking the Law," for Internet station Prime Time Uncensored and has begun posting informational articles and industry news on his law firm's own website. He sat down for an interview with XBIZ Video. Part 1 examines the concept of employee vs. independent contractor.
XBIZ: Explain the difference between an independent contractor and an employee.
FATTOROSI: For purposes of an article, it is a very complex type of situation. And you're also looking at different standards for different uses. The IRS may have one standard, the California Department of Industrial Relations may have a different standard, and of course, the civil courts may have yet even a different standard.
We'll talk about it from a broad standpoint first. If you have the ability to control that particular person that you hire — and what I mean by control is tell them when to show up, where to show up, what to wear; if you provide tools necessary for them to complete whatever you hire them to do, if you require them to take breaks at certain times — this tends to go towards an employer/employee relationship.
The best example I can use is if you needed to paint your home and you decided you're going to hire a painter. You went to the phone book and you called up Bob the Painter. Bob has an ad, and in that ad Bob is a licensed and bonded painter because part of his profession requires licensing and bonding, which requires him to have a certain standard of care and work and diligence in what he does. It also requires him to have workers' compensation insurance for his employees. Well, if you call Bob the Painter, he comes out to your house and he asks, "What color do you want to paint the house?" You get to select a color.
Other than that, Bob pretty much does everything. He schedules the job around when he is available. Bob tells you how long it will take. Bob brings his own equipment and his own workers, possibly. And at the end, usually you pay half in front and half at the end when the job is completed to your satisfaction. In that particular situation Bob would be an independent contractor.
Now, if you decided that Bob's price was too high and you wanted to still paint your house, and you went down to the Home Depot and you bought the paint and the drop cloths, and you bought the scaffolding, the brushes and the paint trays — and then, at the corner next to the Home Depot, there are several day laborers standing there and you decided to hire those day laborers on to come paint your house — they would be considered employees.
Now, if Bob gets hurt while painting your house, Bob can't file a claim against you because he's an independent contractor. If one of those day laborers happens to fall off the scaffolding and hurt himself, he can file a claim against your workers' compensation insurance carrier. Most people don't realize that every homeowners insurance policy comes with a workers' compensation rider for household employees.
XBIZ: The adult industry has been operating for a long time without necessarily observing standard business practices or legalities, operating on the premise that performers and crew people are independently contracted. Do you feel the state of California, at this point, recognizes adult performers as employees?
FATTOROSI: You're assuming that they haven't up to this point.
XBIZ: Well, it doesn't really seem like the state is running out to investigate potential violations.
FATTOROSI: California's a big state and it's got budgetary limitations and they've got a lot of industries in California. A lot of industries are also in the same boat. For a good number of years, migrant farm workers were also treated as independent contractors, or tried to be treated as independent contractors.
I mean, in workers' compensation law there are a lot of little tiny niches and glitches and ways to look at the law; it would be amazing if most people understood it. Most attorneys don't understand workers' comp and certainly most employers don't, but I've been representing [employers] for more than a decade.
I don't think the state of California looks or has now started looking at this particular industry yet. I know when I was up in Sacramento with the Free Speech Coalition for Lobbying Days, one of the things that I heard often from the legislative aides or the legislators themselves was when was the industry going to start treating the actors and performers in a manner more accustomed to that of an employee?
They didn't use those specific terms, but they also talked — a couple did mention workers' comp, some did mention health benefits. So the prevalent attitude in Sacramento is that the industry has to do something for these people and stop making them "throwaway" employees.
California, by nature, has always been a very pro-employee, anti-employer state. Especially with the [mainstream] entertainment business also residing here, no one on that side wants a precedent set on the adult side to be detrimental to their business.
The state of California has gone a long distance in protecting performers — misappropriation of likeness is another where the state Legislature has gone. They protect performers in this state. And when they use the word "performer" or "actor" or "actress," they don't have a little footnote that says, "only mainstream."
So what this industry, I think, has failed to do is to see how it's done in the mainstream world and try to put into place those standard business practices of the mainstream industry in the adult industry. I think this industry is ignoring the fact that they are employees, not the state of California.
The best way to look at this is there was an HIV outbreak in the industry several years ago. Cal/OSHA came in and they fined those companies for not having the proper procedures in place. And while a Cal/OSHA review is not the same as a workers' compensation review or a civil court review, it does lead me and probably anyone else in this industry with a background in workers' compensation to think that all of those actors and actresses involved have valid workers' compensations claims, because they were basically deemed "employees."
XBIZ: Is there an advantage to having employees as opposed to independent contractors?
FATTOROSI: You'd rather have the employee be an employee than an independent contractor.
At the end of the day, if they are an independent contractor, that means they can sue you civilly, which will provide a much higher reward than to an employee seeking workers' compensation. In fact, getting workers' compensation benefits limits your actors, your stage and crew people to what they can recover. Not having it opens the door for them to sue you civilly.
No employee wants to be considered an employee because it limits the amount of benefits they recover. Everybody would want to be an independent contractor because then you could sue your boss for literally hundreds and thousands of dollars in punitives — pain and suffering, all of that — so you want these people to be employees.
That's the message that has to get across to the studios, that you don't want them to be independent contractors. Saying that they're independent contractors opens you up for a lot higher amount of damage than you would worry about if you were paying workers' compensation benefits.
In part two of our interview with Michael Fattorosi, he talks about the benefits of workers' compensation insurance coverage, adult vs. mainstream business models and the potential scenarios that might spur state regulatory agencies into investigative action.